Studies and Research

This page provides research and studies on issues relevant to the capital market activities to support policy decision making and enrich financial literacy of the public. The analyses and opinions in those research and studies express the authors' views and do not necessarily reflect CMA's opinion.

Studies and researches

Survey of specialists' opinions on the mandatory detailed disclosure of the remuneration and compensation of senior executives

Mar 2021

A number of listed companies submitted a proposal to the Capital Market Authority regarding the continuing disclosure in aggregate of the remuneration and compensation of senior executives in the Board report of the listed companies on the Saudi Stock Exchange. This proposal is based on Subparagraph (B-4) of the paragraph (A) of the article 93 of the Corporate Governance Regulation. Which stipulates "A) The Board shall: … 4) a description of the necessary details with respect to the remunerations and compensations granted to each of the following, separately: ... B. Five Senior Executives who have received the highest remuneration from the Company, provided that the chief executive officer and chief financial officer are among them", The disclosures in the Board report of the remunerations granted to the Board members and Senior Executive should be based on Appendix (1) Remuneration Schedule in the Corporate Governance Regulation. Consequently, the Authority has studied the matter and took the opinions of a group of people working in the financial market sector.

Survey of specialists' opinions on the mandatory detailed disclosure of the remuneration and compensation of senior executives

The Effect of Incentive Structure Offered to Top Executives and Corporate Governance Culture on the Performance of Publicly Listed Companies in Saudi Arabia

Sep 2020

the performance of a business has always intrigued researchers and investors alike, This report provides an overview of the incentives offered to the top five executives in publicly listed companies in Saudi Arabia and investigates its impact on their performance. The findings suggest that the majority of the companies offers short-term contracts, but the executives tend to stay longer than the duration of the standard contract. About a quarter of the companies believe that their top executives' salary is below their local competitors and about one in every ten companies believe that their top executive salary is better than their competitors, which is positively related to performance. Most of the companies offer incentive structures that focus on short term interest of the shareholders which is found to have a positive impact on performance. Around 15% of the firms offer long term bonuses in our sample. These companies, however, tend to consistently outperform companies which do not offer retention bonuses and the effect is more pronounced than the short-term incentives. Majority of the companies do not offer stockownership as part of the incentive scheme, but a good number has reported stockownership by top executives as a personal investment which has a positive impact on performance. Around two-thirds of the companies reported that they offer bonuses to non-executive employees with a complex set of criteria to award bonuses. Interestingly, this has a significant negative impact on performance which points toward problems underlying these incentives schemes, Saudi companies do not offer any stock-option as part of the incentive scheme which is getting popular these days around the world.

The Effect of Incentive Structure Offered to Top Executives and Corporate Governance Culture on the Performance of Publicly Listed Companies in Saudi Arabia

The Impact of Shari'a Compliance Advices (SCAs) on the Saudi Capital Market: Evidence from the IPO Market

This report documents the finding of investigation on how investors in Saudi Arabia react to Shari'a scholars' advices, about the compliance of an investment to Islamic teachings they adhere to. The setting of Saudi Arabia initial public offerings (IPOs) market enables to map the decisions of individuals to subscribe into as IPO with the Shari'a compliance advices, Shari'a scholars announced about that particular IPO.

The number of individuals subscribing to an IPO is expected to drop by 80% if Shari'a scholars agree all to reject the IPO firm A Shari'a compliant firm in their compliance advices announced during the IPO subscription period. Moreover, if Shari'a scholars disagree about the Shari'a compliance status of a firm, individuals tend to react to the scholars who approved the IPO as a Shari'a compliant investment while show no significant reaction to the advice of the ones who rejected it.

The Impact of Shari'a Compliance Advices (SCAs) on the Saudi Capital Market: Evidence from the IPO Market

The Information Content of Earnings Announcements : Evidence from the Saudi Market

Jan 2019

Do earnings announcements convey useful information to investors in the marketplace? Our results reveal that the market reaction to the information content of earnings announcement, measured by abnormal trading volume, has been increasing over the years. The results provide supportive evidence that regulatory applications have played an important role to enhance the efficiency of announcements released by companies in the marketplace. Additionally, our findings suggest that the leakage of information and the level of insider trading have relatively decreased due to the Capital Market Authority's efforts in improving the information environment.

The Information Content of Earnings Announcements : Evidence from the Saudi Market

An Empirical Investigation of the Post-IPO Operating Performance in the Saudi Stock Market

May 2018

Consistent with the empirical findings in the literature in developed and emerging markets, our analysis suggests that the operating performance, measured by return on assets (ROA) and return on equity (ROE), deteriorates in post-IPO period. The analysis has been conducted on the firm level, industry level, across time, based on the use of the IPO proceedings, and government holdings before and after the IPO. The main result of the analysis still holds in all specifications. Data Envelopment Analysis (DEA) technique has also been implemented to investigate the question in hand. DEA allows us to examine the difference between the pre-and the post-IPO operating performance based on several inputs and outputs. The empirical results are similar to the analysis of means. Most companies show a decline in their performance relative to their pre-IPO performance.

This is the final report of the project “An Empirical Investigation of the Post-IPO Operating Performance in the Saudi Stock Market”. This report summarizes the two previous reports and adds further analysis to the post-IPO operating performance across sectors, time, government ownership, and the IPO proceedings. Also, this report discusses the challenges and the opportunities encountered by the team throughout the project stages. Finally, the report concludes and gives recommendations that arise from the analysis and the investigation process.

Mutual Funds Performance in Saudi Arabia

This study offers a consideration of the performance of locally focused equity mutual funds in Saudi Arabia, specifically in comparison to the performance of their benchmarks in the Saudi Arabian context. The purpose is to present an in-depth analysis of the performance of Saudi equity mutual funds. The central research question is: Do locally focused equity mutual funds outperform the Saudi market?

The CMA and the Saudi Stock Market Crash of 2006 (summary) Octo 2017

By the end of 2006, the stock market’s main index (TASI) had lost approximately 65% of its value, and market capitalization had fallen by half. Also the global financial crisis of 2008 had caused the stock market to plummet even more than it had in 2006, two lessons from this experience should be learned.

First, what could it have done to prevent the crash at the time?
Second, what could it do now to prevent future catastrophes?

The CMA and the Saudi Stock Market Crash of 2006 (summary) Octo 2017

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Reports and Research